Community hospital days are numbered

Compared to the rest of the country, this region has been somewhat unusual when it comes to its health care system.

That may not be the case for much longer, however.

While at least one of the hospitals serving most other regions is part of a larger network, this area has had the distinction of having three independent, nonprofit community hospitals. Lawrence & Memorial Hospital in New London, the largest of the three; The William W. Backus Hospital in Norwich; and The Westerly Hospital, the smallest, all maintained their solo status through a wave of affiliations and mergers that swept the industry in the 1990s.

"To have three independent, unaffiliated hospitals in your community is an anomaly," said Alwyn Cassil, director of public affairs at The Center for Studying Health System Change, a Washington, D.C.-based research and policy analysis organization.

In May, however, Backus announced it is pursing an affiliation with Hartford HealthCare, a network that includes Hartford Hospital - at 867 beds, the largest in the group - as well as Natchaug Hospital, the Hospital of Central Connecticut, Windham Hospital and others. Also in May, L&M announced it had submitted a proposal to acquire The Westerly Hospital, which is in receivership after years of operating deficits.

Also following this "bigger is better" pathway are six other hospitals in the state: St. Francis and Johnson Memorial Medical Center; Yale-New Haven Hospital and St. Raphael Healthcare System; and St. Mary's and Waterbury Hospital. Four others joined forces in 2011 and 2010, according to the Connecticut Hospital Association.

The trend, Cassil said, reflects an industry trying to find more economical ways of doing business. Provisions of the Affordable Care Act will give incentives to hospitals for "tighter integration of services," she said, even as payments from Medicare, a major income source for hospitals, will remain flat or grow only incrementally. In addition, a "volume to value" shift is occurring that will pay hospitals based on the quality of care provided versus "filling up hospital beds."

"This has got hospitals' attention, that they will have to become more efficient," she said. "Hospitals know they're going to have to do better, because we're spending $1 out of every $5 on our nation's health care, and we don't have great health to show for it."

The emerging system, she added, will be one that rewards "better care coordination and keeping people out of the hospital."

By getting larger, she said, hospitals are looking to save on administrative and back office costs and to reduce duplication of services by formerly independent institutions. Also, larger hospitals have greater negotiating leverage with health insurance companies for reimbursement rates, she said.

Adapting to change

Bruce Cummings, president and chief executive officer of L&M, said the 280-bed hospital's decision to offer $69 million to acquire The Westerly Hospital is part of a deliberate strategy of adapting for the future by becoming larger itself, rather than affiliating with another institution. The proposal awaits approval of the court overseeing the receivership process, as well as of state and federal regulators.

L&M has relationships with other institutions for certain services - Yale-New Haven for cardiac care and Dana-Farber for cancer care, for example - but remains committed to keeping L&M as a whole its own unique institution. The goal, he said, is for L&M to remain financially stable and to continue providing high quality health care as it weathers the changes ahead.

"For us at L&M," Cummings said, "maintaining independence is an evolving strategy. Our focus is on our continued ability to be nimble in adapting to current and future changes in the industry."

At Backus, the plans to affiliate with Hartford HealthCare, which would have to be approved by state and federal regulators, are intended to create a partnership that would strengthen access to health care for residents of eastern Connecticut, said David Whitehead, president and chief executive officer of Backus, in a statement sent to employees today.

He emphasized that while this would be a historic change for Backus, the new relationship would not be an acquisition, but rather, an affiliation. The two hospitals jointly announced that they had reached a memorandum of understanding to develop an affiliation agreement.

"Backus isn't selling - and Hartford HealthCare isn't buying," Whitehead wrote. "Months of discussions, research and hard questions have led ... both institutions to a rock-solid belief that this partnership is the key to creating a more responsive, cohesive and accessible health care delivery system."

All donations made to Backus previously and in the future would stay with Backus, Whitehead said.

Shawn Mawhiney, spokesman for Backus, said the Backus name and its board of directors would remain, and its role would continue to be to ensure that the 213-bed hospital provides high quality health care.

"Day-to-day operations and decisions that impact the delivery of patient care would be made at the local level," he said.

He added, however, that decisions about strategic plans and capital expenditures would be made collaboratively with Hartford HealthCare. Backus would have representatives on the Hartford HealthCare board. Backus' assets and liabilities would be listed on the Hartford HealthCare financial statements, but Backus would maintain a separate license and also produce independent financial statements, he said.

"The (Backus) board will prioritize capital budgets, support philanthropy and community outreach, and monitor and provide direction on operating results," Mawhiney said. "Hartford HealthCare will have certain reserve powers, in a consultative and collaborative manner with the Backus board."